Tobacco growers will have to weigh options in light of closing

February 9, 2012

ROSE HILL—Smaller-scale burley tobacco growers in Southwest Virginia will have to consider their next move in light of the closing of a Philip Morris USA receiving station.

Philip Morris announced to growers on Jan. 13 that it planned to close its Tennessee Valley Tobacco Services facility in Midway, Tenn. The station receives 6 million pounds of burley tobacco a year and brings in roughly $10.5 million to the economies of upper East Tennessee and Southwest Virginia.

Burley is a light, air-cured tobacco used primarily for cigarette production.

Lee County grower Jonathan Cavin said Philip Morris has told growers it no longer needs as many burley receiving stations as it once did and hopes to cut operating expenses while still receiving burley at its remaining stations.

Cavin, who grows 85 acres of tobacco annually, is concerned about the potential economic loss for his region and the impact on the 138 Southwest Virginia burley growers who contract with Philip Morris parent company Altria. While he and other larger-scale growers should be fine, Cavin said, growers with only a few acres of tobacco will have to weigh their options.

“They’ll be traveling farther, spending more on fuel, and to make the trip worthwhile they’ll need a full load of tobacco,” he said. “The cost of fuel has already increased, and for farmers in this area their trip will be doubled from two hours to four hours. Is it still cost-effective for them to grow tobacco? That’s something they’ll have to decide.”

Al Glass, vice president of commodity marketing for Virginia Farm Bureau Federation, said tobacco farmers have not lost their contracts with Altria, but they will need to decide if it is still feasible for them to sell their tobacco under the new circumstances.

“This is a risk of doing business,” Glass said. “Farmers need to decide how they can best exist under these circumstances, but the outlook for small growers is still good, as they have other options.”

Danny Peek, tobacco specialist at the Southwest Virginia Agricultural Research and Extension Center in Washington County, said he doesn’t think small-scale growers will sell to Altria.

“If they have to travel to Kentucky or farther, they will try to get a contract with someone closer to them, like Burley Stabilization Corp. or R.J. Reynolds Tobacco Co.,” Peek said. “Both companies have stations that are interested in buying the tobacco.”

Peek said market conditions tend to change from year to year, and it is hard for growers to make long-term plans, but that tobacco is in high demand.

“Any time someone pulls out, it is scary for growers,” he said. “But no one that grows high-quality tobacco will have a hard time finding someone to buy it. I don’t see anyone turning a grower away.”

Small-scale growers who are interested in selling to Altria could pool their tobacco and then sell it individually at the receiving station to save money, Peek said.

“I’ve seen an interest with growers that got out of tobacco (in) getting back in it,” he noted. “We’ll have to see how it goes, but tobacco is now in demand.”

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